Introduction to Breaker Blocks (Simplified)

Summary

In this video, Mino explains the concept of 'breaker blocks' in trading, focusing on both bullish and bearish setups. A breaker block is a pattern formed by specific candle formations that help traders spot potential price movements. Mino walks through the sequence of events that define a bullish breaker block (low, high, lower low, higher high) and a bearish one (high, low, higher high, lower low), highlighting how to identify key candles and use them to draw the breaker block. He also shares practical examples and tips for using breaker blocks in actual trading scenarios, stressing the importance of timing and confirmation for successful trades.

Takeaways

• 😀 A breaker block is a formation of candles that creates a specific pattern in the chart, which can be used to take a position.
• 😀 The bullish breaker block is formed by a low, a high, a lower low (taking liquidity from the first low), and then a higher high.
• 😀 The bearish breaker block is formed by a high, a low, a higher high (taking liquidity from the first high), and then a lower low.
• 😀 A breaker is defined as the highest consecutive up-close candles before a liquidity sweep for the bullish breaker and the lowest consecutive down-close candles before a liquidity sweep for the bearish breaker.
• 😀 To draw the bullish breaker block, use the top wick of the highest candle and the bottom wick of the lowest candle in the pattern.
• 😀 For the bearish breaker block, use the lower wick of the lowest candle and the upper wick of the highest candle in the pattern.
• 😀 After drawing the breaker block, the price must close above (bullish) or below (bearish) the block to confirm it.
• 😀 In both cases, once the breaker block is confirmed, look for price to retrace back into the block before moving in the direction of the trend.
• 😀 The breaker block acts as a support or resistance level, depending on whether it's bullish or bearish, guiding the entry and exit of trades.
• 😀 Timing is critical when using breaker blocks, and liquidity sweeps at key times (like market opens) can be key indicators of the setup.
• 😀 The script also emphasizes the importance of understanding and defining the breaker correctly, particularly for beginners to avoid common mistakes.

Q & A

What is a breaker block in trading?

A breaker block is a formation of candles that creates a specific pattern on a chart, used to spot potential trading opportunities. The pattern involves a sequence of price movements that indicate a shift in market dynamics.

How is a bullish breaker block formed?

A bullish breaker block is formed by a sequence of price movements: a low, a high, a lower low (which takes liquidity from the first low), followed by a higher high. The highest up-close candles before the liquidity sweep define the breaker block.

What is the role of liquidity in identifying a breaker block?

Liquidity plays a critical role in identifying a breaker block. The price movement must sweep through previous highs or lows, taking liquidity before forming the breaker block. This sweep signals a potential reversal or continuation of price movement.

How do you draw a bullish breaker block?

To draw a bullish breaker block, identify the two consecutive up-close candles just before the liquidity sweep. Use the highest wick of the first candle and the lowest wick of the second candle to form the breaker block range.

What is the confirmation for a bullish breaker block?

The confirmation for a bullish breaker block is a close above the breaker block. After this confirmation, the price should retrace into the breaker block before moving upwards, confirming the pattern's validity.

What sequence defines a bearish breaker block?

A bearish breaker block is formed by a high, followed by a low, a higher high (taking liquidity from the first high), and finally a new lower low. This sequence mirrors the bullish one but in reverse, indicating a potential downward movement.

How is a bearish breaker block drawn?

To draw a bearish breaker block, identify the two consecutive down-close candles before the liquidity sweep. Use the lower wick of the lowest candle and the upper wick of the highest candle in the sequence to create the breaker block.

What confirmation is required for a bearish breaker block?

For a bearish breaker block, confirmation comes from a strong candle closing below the breaker block. Once confirmed, price should retrace into the breaker block before moving downward, signaling a potential entry for a short position.

What is the importance of timing when using breaker blocks in trading?

Timing is crucial when using breaker blocks. Traders must identify the liquidity sweep and the breaker block in real time, with specific entry points at the right moments, such as after a strong close above or below the breaker block.

What should you look for when choosing the right breaker block to trade?

To choose the right breaker block, look for a clear liquidity sweep and a defined sequence of candles forming the breaker. The block must be followed by a valid price move, either above for bullish or below for bearish setups, with price retracing into the breaker block to confirm the pattern.